Austin and Central Texas homeowners may be wondering if a higher property tax appraisal will mean that you have to pay more for your homeowner’s insurance. Here’s what you need to know.
What is a property tax appraisal, and how is it determined?
A property tax appraisal estimates the value of a piece of property for tax purposes. The appraised value is generally determined by considering the sale prices of similar properties in the area. The easiest way to understand your tax appraisal value is to think of it as the home’s market value.
What is the difference between a property tax appraisal and the amount of coverage on a home insurance policy?
A property tax appraisal and the amount of coverage on a home insurance policy are two different things. The property tax appraisal estimates the value of a piece of property for tax purposes and is often related to its market value. At the same time, the amount of coverage on a home insurance policy is an estimate of the rebuilding cost of your home if it were to be destroyed. Your insurance policies coverage amount should reflect the amount you might have to pay a contractor to rebuild a home like yours. So, even if your appraised value goes up, your policy coverages may stay the same if the cost to rebuild has not increased.
How will a higher appraisal impact your home insurance premiums?
A higher tax appraisal does not have a direct impact on your home insurance premiums. Just because your tax bill goes up, does not mean your home insurance bill will go up. Your home insurance premium is determined by many things, but your home’s market value or tax-appraised value is not one of them. Instead, your home insurance premiums may go up if the rebuild cost for your home increases, and therefore your coverage amount is increased. It could also go up if the insurance company increases rates for all clients in your area due to poor underwriting results, if there have been natural disasters in your area which have caused increased claims, or if the rating factors about your home have changed.
What does this all mean for homeowners in Texas and beyond?
In short, a higher property tax appraisal doesn’t necessarily mean that you’ll have to pay more for homeowners insurance. However, some circumstances could lead to an increase in your premium, such as if the cost to rebuild your home has increased. If you’re concerned about your rates going up, contact your insurance agent or company.
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Author: Dshanya Reese, CIC